16.55 European markets have had an equally torrid day, but they did manage to regain some earlier losses before close.

In Germany the DAX closed down 0.73c

In France the Cac was down 0.51pc

In Spain the Ibex was down 0.56pc

16.45 A torrid day for stock markets has come to an end. Hit by worries about monetary policy tightening on both sides of the Atlantic as well as disappointing updates from US corporate giants Cisco and Wal Mart, the FTSE 100 has slumped 104.09 points, or 1.6pc, to 6,483.34 and the mid-cap FTSE 250 is off 393.34 at 14,693, a 2.6pc fall.

By the time trading in London had finished, the Dow Jones Industrial Average had tumbled more than 170 points.

But, he notes, the losses have been broad based with house builder Persimmon continuing its sharp declines from yesterday, to close down 7.9pc.

It appears the house builders and suppliers across the board are declining after fairly good runs in recent weeks, with Travis Perkins and Wolseley slipping back as well.

16.10 The increasing taper fears have also sent the bond yield on 10-year US treasuries shooting up, hitting 2.789, the highest level since July 2011.

It is also affecting the UK 10-year bond yield which is up to 2.674, the highest level since August 2011.

Ishaq Siddiqi, market strategist at ETX Capital, said:

Stocks and bonds in freefall now as bond yields hit fresh highs.

He also notes that it would normally just be bonds affected by the QE taper as investors dump them in favour of equities. But not this time.

So, the move today in financial markets is one of dumping bonds in response to optimism over the US economy/Fed tinkering QE but typically, you would see equities in favour as the asset is perceived as a riskier investment compared to fixed-income. That’s not the case this time with investors dumping both assets and let’s not forget – there’s nowhere really to hide other than the USD which will be this year’s standout winner anyhow due to the recovery in the US.

US 10-year treasury yield since July 2011. Source: Bloomberg

15.52 US markets are all deep in the red as the QE tapering fears resurface following the good news on jobs (see 15.04).

The DowJones is down 1.4pc, the S&P500 is down 1.3pc and the Nasdaq is down 1.61pc.

Tom Porcelli, chief US economist at RBC Capital Markets, said:

It's a set of data that will add to the September tapering conversation.

15.23 Here are some charts that visualise the steep sell-off of US Tresuries by foreign central banks and foreign investors at the moment, courtesy of Wells Fargo. They are being sold off at the fastest pace on record, in the aftermath of a heady two years in which foreign investors, looking for a safe alternative to eurozone bonds, poured into the asset. The double effect of the eurozone returning to health and the Federal Reserve looking to ease its Treasury purchases has seen investors flock out.

The charts on the right-hand side give the long-term flows, which is the sum of gross foreign purchases less the sum of gross sales by foreigners to U.S. residents. It shows that June saw the largest monthly outflow since August 2007. According to Wells Fargo, the selloff then was primarily in the mortgage-backed securities market and was the precursor to the financial crisis. Jay Bryson, Wells Fargo economist, said: "We do not view this as a similar “shot across the bow” but rather just an unwinding of some of the flight to quality from 2010 combined with tapering."

Source: Wells Fargo

15.04 More good news from the US economy - in two separate surveys, the New York and Philadelphia Fed's factory indices both signalled that manufacturing activity expanded in August.The Federal Reserve Bank of Philadelphia's general economic index, which covers eastern Pennsylvania, southern New Jersey and Delaware, gave a reading of 9.3, where any reading more than zero indicates growth. A similar report from the New York Fed, which looks at New York state, northern New Jersey and southern Connecticut, came in at 8.2.

14.54Matt Phillips from Quartz tweeted this chart showing how initial jobless claims in the US have returned near pre-crisis levels...

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Source: Quartz via @MatthewPhillips

14.41 Meanwhile US industrial production held steady in July, slightly missing analysts' expectations of a 0.3pc rise. Manufacturing and utilities fell, but mining activity ticked up.

14.39 The bad news from Wal Mart has also hit market sentiment today, with the FTSE 100 falling further to trade 1.6pc lower at 6,482 in afternoon dealings. The Dow Jones Industrial Average in the US has, as expected, also opened in negative territory, having fallen 1pc in early trade.

14.09 US consumer price inflation, on the other hand, pulled no punches, coming in exactly in line with economists' expectations of a 0.2pc rise in July - bringing the year-on-year rise to 2pc. The figure will come as a welcome relief for the Fed - several months of low inflation had stoked worries that the US economy risked tipping into deflationary territory.

13.56 True to form, the US dollar has also spiked following news that new weekly jobless claims had fallen to a six-year low.

Source: Bloomberg

13.45 US cost of borrowing hits two year high

The imminent prospect of the Federal Reserve tapering its bond-buying programme, on the back of the better-than expected jobs data, has pushed US borrowing costs to a two-year high. Yields on 10-year notes and 30 year bonds climbed to their highest since August 2011 in the wake of the jobless claims report.

13.34 A real expectation-smashing jobless claimant figure from the US. The number of Americans filing new claims for unemployment - a proxy for the number of people who have just lost their jobs - fell to a near-six-year low last week. Initial claims for jobless benefits fell 15,000 to 320,000. Economists had expected the figure to come in at 335,000.

The figure is likely to impact on US equity market when they open later this afternoon - traders have closely monitored the jobs market ever since the US Federal Reserve tied its monetary policy to the unemployment rate in December, saying it would keep monetary policy loose until the rate dropped to 6.5pc.

13.09 Falls in the London stock market have accelerated now, although there doesn't appear to be one specific cause behind the move. The FTSE 100 is off 89 points, or 1.4pc, at 6,498, with declines in AstraZeneca and GlaxoSmithKline - in the wake of a broker downgrade - weighing on the index. Some dealers say weakness in Japan overnight, where the Nikkei 225 lost 2.1pc, is weighing on sentiment today, while in the US both the Dow Jones Industrial Average and the S&P 500 also lost ground.

13.06 Some companies operating in Egypt have closed up for the next few days

Shell is closing its offices in the country for the next few days and restricted business travel, "to ensure the safety and security of our staff". Electrolux, the Swedish home appliances manufacturer, has also halted operations for now.

12.57 Ryanair has sacked the pilot who questioned the airline's safety record on Channel Four's Dispatches

John Goss, the pilot who appeared on Channel Four's investigative programme Dispatches, has been fired by the airline for making "defamatory contributions" in the documentary. Ryanair has also instructed its lawyers to issue legal proceedings against him.

In the programme, Goss said he received a critical letter for using too much fuel and said many Ryanair pilots did not have confidence in the safety reporting systems of the Irish Aviation Authority (IAA). The IAA has since insisted that all confidential reports are fully investigated and that its oversight of Ryanair was comprehensive.

Ryanair has faced accusations from its pilots that it encourages crew to carry less back-up fuel, and uses disciplniary threats to discourage the reporting of safety concerns.

12.49 Is immigration keeping interest rates low?

Shore Capital's Gerard Lane has sent a note to clients about the Bank of England's pledge to keep interest rates at their record low at least as long as unemployment remains above 7pc. Mr Lane praises the Bank's "clear and specific guidance" around the conditions that may warrant higher interest rates and the "complex and complete analysis aruond the labour market conditions that may lead to lower unemployment". However, one important point is missing from the discussion, he says:

The unemployment level of 2.5 million people, is 452,000 higher than in 2008 Q4. Over the same period the level of overall employment has risen by 318,000 to Q2 2013.

Not wishing to appear xenophobic, the level of employment of UK-born people has fallen by 254,000, and non-UK born employment has risen by 572,000. People from the new Euro area accession countries (EA8) have seen their employment rise by 201,000.

Whilst the data regarding employment and unemployment refer to different sources, we suggest that immigration has absorbed over 500,000 jobs, that may have otherwise led to a fall in unemployment. An unemployment level of below 2 million would correspond with an unemployment rate of c6.5pc, in our view. The question may well be asked, whether immigration is keeping interest rates low…..

12.24 US supermarket behemoth Wal-Mart has disappointed investors by posting a 0.3pc decilne in same store sales. The chain has slashed its full-year sales forecast, predicting that sales will rise 2-3pc rather than 5-6pc. Here's Walmart's chief financial officer Charles Holley:

The retail environment remains challenging in the U.S. and our international markets, as customers are cautious in their spending. Net sales in the first six months were below our expectations, so we are updating our forecast for net sales to grow between 2 and 3 percent for the full year versus our previous range of 5 to 6 percent.

This revision reflects our view of current global business trends, and significant ongoing headwinds from anticipated currency exchange rate fluctuations.

<noframe>Twitter: Steve Goldstein - Wal-Mart reporting what Washington forgot: the end of the payroll-tax cut is still having an impact <a href="http://t.co/155XvLl2ot" target="_blank">http://t.co/155XvLl2ot</a></noframe>

Photo: Alamy

11.57 What have we been spending our money on? Here's the ONS break-down by retailer type.

<noframes>Datatable: UK July retail sales by type of shop</noframes>

11.49 Back with the stock market's movers and shakers, oil explorergroup Ophir Energy is a notable faller, having slumped 10.3pc in the wake of an underwhelming update that lacked concrete news on the group's search for a partner in Equatorial Guinea. The FTSE 250 company also disclosed delays to its drilling programme, which has unsettled traders.

11.43 Buffett buys into Dish Network

Billionaire investor Warren Buffet moved his money around a bit in the second quarter. His fund Berkshire Hathaway raised its holding in General Motors and Wells Fargo. He also bought into the US's second biggest US satellite TV provider, Dish Satellite, for the first time.

The fund moved money out Kraft, Moody's and Mondelez.

11.18 Back in the stock market, AstraZeneca is a leading FTSE 100 faller after analysts at heavyweight broker Morgan Stanley turned negative on the pharmaceuticals giant. The shares slid 2.8pc. Brokers also weighed on copper miner Antofagasta, off 2pc after JPMorgan Cazenove cut its recommendation on the company to "neutral".

10.40 The violent clashes in Egypt has sparked fears among oil traders that the violence could spill into its oil-producing neighbours and impact supplies. Brent has now climbed above $111 a barrel.

<noframes>Interactive chart: Brent crude ($ per barrel)</noframes>

10.35 The British Chambers of Commerce dismisses concerns about uneven growth in the British economy, saying that consumer spending is a good first step on the way to full economic recovery. David Kern, their chief economist, said:

Some commentators have suggested that strong retail sales, while other areas of the economy remain weak, will lead to an unbalanced economic structure. We don’t share these concerns, as although we would like to see more growth coming from investment and net trade, it is better to rely initially on domestic demand than to have no growth at all.

And while net exports are not as strong as we would like, there is an improvement – a point that many commentators ignore. To maintain business confidence we should focus on the positive features of our economy. In addition, increasing the flow of credit to growing businesses and keeping inflation low will help to gradually rebalance the economy.

10.25 The FTSE 100 has slumped lower in mid-morning trade, not helped by weakness in US markets overnight where investors remain concerned about a tapering of American quantitative easing. The London index is off 31 points at 6,556, a 0.5pc fall. The strong UK retail sales data will also have weighed, as it suggests interest rates could be lifted sooner than expected.

10.15 The pound hit a two-month high against the dollar following the upbeat data on July retail sales. It rose as high as $1.5589 immediately following the news, and is now trading around $1.5580. Economists say the data suggests the UK economy is growing faster than many predicted, which could well mean a return to higher interest rates at the Bank of England sooner than we thought. Here's Rob Wood at Berenberg Bank digesting the figures:

Wow again. Again, again, yet again. It's hard to remember the last time a UK data release wasn't stunningly positive and we've just had another one today... What's the bottom line? The stimnulus is working and uncertainty is falling rapidly as the euro zone gets back on its feet and I think those two things are driving the UK back to growth, so low interest rates, sunnier outlook and all-faithfull rising house prices getting consumers out consuming.

At the minute this is a sugar rush of low interest rates but there's a good chance it can broaden out into something more sustainable over the next year. We've been seeing manufacturing production going up, exports seem to be stabilising as the euro zone (recovers) and productivity went up in Q2 as well, which should help real wages. Good news Britain.

I think with yesterday's minutes, the fall in the (jobless) claimant count and this release pointing to growth significantly outperforming the Bank of England's forecasts ... it's likely unemployment will fall to the 7 percent threshold sooner than they expect.

09.59 July's figures do not mean the high street is back in business, says Peter Saville of restructuring firm Zolfo Cooper. He

The recent good news for retailers continues, with July posting the third consecutive month of positive figures. However, the picture on the ground remains mixed, with many high streets and companies still struggling.

In contrast to the positive economic indicators, earnings, unemployment and interest rates remain unchanged – as does the squeeze on consumer spending. With summer beginning to wind down, retailers need to work towards a sustainable recovery by overhauling their business models, product offering and customer experience.

09.42 Scotiabank's Alan Clarke raises the alarm bell, saying the figures show that Britons are willing to spend more than they earn.

Real household disposable income is negative and going down, and this is basically telling you that people are definitely feeling the feel-good factor of the Help to Buy scheme pushing up house prices.

People are prepared to spend more than they earn. This is bad growth but I'd rather have bad growth than no growth.

09.30 Britons hit the shops in a big way last month, according to latest figures on retail sales from the Office of National Statistics. Sales jumped 1.1pc in July, almost twice analyst expectations of a 0.6pc rise, as the sunny weather sent shoppers flocking for barbeque food and outdoor items. Compared with July 2012, retail sale rose 3pc, the highest year-on-year jump since January 2011.

09.19 Even well-known gold-bugs are cutting their holdings in the yellow metal

Earlier we mentioed that World Gold Council report which said that demand for gold has tumbled to a four-year low. It seems the metal's sheen is dulling even for its most avid fans, including billionaire investor John Paulson, who has halved his gold holdings.

Paulson's hedge fund is one of the world's largest investors in gold, but over the course of the second quarter slashed its stake in the SPDR Gold Trust to 10.2m shares from 21.8m.

09.00 And now Ms Pettifor has expanded on her comments to the Today programme in a blog on the Prime Economics website. She points out two problems - rising household debt and falling household borrowing and says the Chancellor has done nothing to follow through with his vision, laid out in 2010, for a "new model of economic growth that is rooted in more investment, more savings and higher exports"

Given the Chancellor’s analysis back in 2010, it is extraordinary that the idea of “a new model….rooted in more investment, more savings and higher exports” was allowed to gather dust on Treasury shelves. Since the election, the Coalition government has effectively sat on its hands, and adopted a do-nothing-approach because, they argued, cutting public-spending alone, would spur on-private-sector activity, seen as the economy’s only source for recovery. Despite all the evidence of huge spare capacity and high unemployment, the Treasury still stuck to the thesis that public spending ‘crowds out’ private investment.

As a result economic activity has progressively decelerated. The increase in GDP in 2010 was a relatively poor 1.7%; in 2011 this slipped back to 1.1% and in 2012 it required a magnifiying glass to see it at all, being just 0.4%.

08.30 Political correspondent Steven Swinford has more details on Ann Pettifor's warning that people are taking out payday loans and raiding their savings to fuel shopping sprees. Here's what she said:

I think it's artificial and can't be sustained. People's incomes are falling in real terms, and have done so for five years. Now there's been this sudden, go on let's just go made because everyone says its recovery.

At a fundamental level it's quite dangerous because household debt is still 153pc of GDP.

There's nothing seriously underpinning this recovery, and that's why it's Alice in Wongaland, the confidence fairy is out there.

08.03 The FTSE 100 has had another slow start to the day, having edged three points lower to 6,584 in early deals. Imperial Tobacco, which has released its nine-month update, is the biggest blue-chip riser with a gain of 2pc.

08.00 Now for some corporate news, courtesy of the City Briefing email by James Titcomb.

Britons continue to set new records at the cinema. Cineworld, the UK's second-largest cinema operator, has posted a 21pc rise in sales and a 24pc increase in profit before tax in the first half of the year, thanks to the success of Les Miserables and Iron Man 3, as well as the impact of Picturehouse, the boutique operator it recently acquired. Chief executive Stephen Wiener says: "Once again our results show that cinema is a resilient investment in challenging economic times."

Casinos and Bingo remain popular too: Rank Group, the owner of Grosvenor casinos and Mecca Bingo, has revealed a 7pc increase in annual revenue to £625m, although it admits that hot weather has kept punters away from its properties in recent weeks.

Imperial Tobacco, the FTSE 100 maker of Gauloises and Davidoff cigarettes, says volume sales have fallen 7pc in the nine months to the end of June, and that price rises have not offset this with revenues down 3pc.

FTSE 250 property company Derwent London has doubled first-half profits to £220m. John Burns, Derwent's chief executive, says that the boom in demand for office space among technology firms and in the creative industries has improved trading.

Les Miserables boosted ticket sales at Cineworld, where profits rose 24pc in the first half. Photo: Working Title

07.49 In Japan, the Nikkei has fallen 2.12pc after the country's finance minister denied media reports that the government is planning a corporate tax cut. A stronger yen also hit shares in exporters, with car-maker Toyota losing 0.9pc and Kubota Corp, a tractor maker which exports to the US, falling 3.2pc.

07.40 Demand for gold has slumped to a four-year low, the World Gold Council has said. While consumer demand for the yellow metal, in the form of jewellery, coins and bars has surged, investors and central banks are exiting gold funds in droves as they face the prospect of a wind-down of the Fed's quantitative easing programme.

<noframes>Datatable: Gold demand by sector (in tonnes)</noframes>

Consumers have been snapping up gold as its price falls, but not enough to offset slumping demand from investors. Photo: Alamy

07.26 Our top story on the finance page this morning is that Mark Carney may have to relaunch quantitative easing in order to keep interest rates down. Philip Aldrick reports.

The Bank of England is expected to take further action to ensure interest rates remain low after last week’s pledge failed to sway the market.

Top economists said the Monetary Policy Committee (MPC) could relaunch quantitative easing (QE) within months if markets did not move into line with the “forward guidance” unveiled by Governor Mark Carney last week.

The warning came after another rise in both sterling and government borrowing costs, and as traders brought forward their forecasts for a first rate rise to the third quarter of 2015 – roughly a year earlier than the Bank has signalled.

07.11China pricing probe to extend to broad sweep of industries

Chinese authorities have announced they are widening their probe into pricing across all industries that have an impact on the lives of ordinary people in China. Xu Kunlin, head of the anti-monopoly bureau at the country's price regulator, the National Development and Reform Commission (NDRC), appeared on state television on Thursday to announce the move. He named the telecoms, petroleum, banking and auto sectors as areas of focus for the investigation.

Already, the pharmaceuticals, dairy and luxury car sectors have faced scrutiny from regulators in China, with six milk powder firms fined last week for anti-competitive behaviour.

07.05 Alice-in-Wongaland economy?

Earlier this morning Ann Pettifor of Prime Economics branded the UK an "Alice in Wongarland economy" on Radio Four Today's Programme. Sources of growth are "ephemeral", she said, with Britons using debt to fund shopping sprees.

07.00 Good morning and welcome to our daily business and markets live blog, your one stop shop for all the breaking business stories of the day.